Dysfunctional DCR tries to be smarter landlord

Photographs by Michael Manning

THE HEAD OF THE CHARLES Regatta is a major draw for Massachusetts. Attracting more than 11,000 athletes and tens of thousands of spectators from all over the world, the October regatta is to rowing what the Boston Marathon is to long-distance running.

For the Department of Conservation and Recreation, the state agency that owns the Charles River and its shores, the regatta also presents a dilemma. Should the agency offer access to the river and its shoreline as a public service, or should it share in the profits from the event and use the money to bolster the agency’s tattered finances?

DCR faces these types of questions on a daily basis. The agency is the largest landowner in the state. It owns the Esplanade, the Walden Pond State Reservation, Nickerson State Park, and many other parks and beaches. It also owns 2,000 buildings, four working piers, three ski areas, two golf courses, two summer theaters, six bocce courts, and assorted ice rinks and pools. In all, the agency owns 450,000 acres of land.

Despite its massive responsibilities, DCR has the image of a sad-sack state agency. Over the years, governors have used the agency as a patronage haven, commissioners have come and gone at lightning speed, and the agency’s budget and workforce have never kept pace with its responsibilities. The parks, pools, and rinks that DCR oversees generally keep operating, but day-to-day financial management of many of the agency’s properties, particularly those leased to third parties, has been neglected.

Four years ago, CommonWealth reported that some DCR tenants had been operating for long periods of time without leases and other tenants were paying rents that were either well-below market rate or not paying anything at all (“Freeloading,” CW, Winter ’12). State Auditor Suzanne Bump was called in and in 2013 she recommended a number of initiatives to put the agency on solid footing. The Legislature also passed a law in 2010 authorizing DCR to negotiate long-term leases with yacht and boat clubs that for years had been paying cut-rate rents.

Progress has been slow, painfully slow. DCR has yet to implement many of the recommendations in the audit report. Some DCR tenants continue to pay no rent, while the yacht and boat clubs are just now being required to increase their payments. An outside consulting firm brought in more than two years ago to help the agency get a handle on all its leases is still on the job, running up a tab that will reach $777,000 next year.

In August, a report commissioned by the administration of Gov. Charlie Baker documented in stark terms how DCR is poorly managing state piers in New Bedford, Fall River, Plymouth, and Gloucester. In New Bedford, for example, the consultant says accurate revenue and expense reports for the pier did not exist, but guessed that DCR suffered a $28,000 loss operating the pier in 2015.

Against this backdrop of mismanagement, DCR’s permit arrangement with the Head of the Charles Regatta might seem like small potatoes. Yet the lease with the nonprofit that runs the regatta is symptomatic of the agency’s mindset, a mindset that DCR commissioner Leo Roy hopes to change.

DCR offers the regatta access to the Charles River and eight designated areas along the shore for 13 days for a base fee of $45,000, plus reimbursement of any agency expenses in excess of that amount. In 2015, DCR collected a total of $97,650 from the regatta organization.

By contrast, the nonprofit brought in $3.1 million last year from the event, and a third of that amount was pure profit. While DCR struggles to maintain services with a declining budget, the nonprofit’s tax return indicates it has built up a $5.1 million endowment. The regatta’s executive director, Frederick Schoch, is paid $306,489 a year, more than twice the salary of the DCR commissioner.

Roy, a little over nine months on the job, says it is time for DCR to start collecting fair-market rents on the properties it leases. He says many of the agency’s permits and leases go back decades, and reflect the attitude that below-market rents are acceptable if the tenant is providing a public service in line with DCR’s mission.

“I approach this on a fairness basis,” Roy says in a telephone interview. “If I let one group use a piece of riverbank on the Charles River at a below-market rate, that’s revenue that I’m starving from the system as a whole. So maybe there is a park in the central part of the state that’s not getting the resources it needs because I’ve got a below-market situation here. What I’m trying to do over time is really systematically get all of the rents across the system up to a market rate, or up to a near-market rate. It’s a multiyear effort.”

MATCH MADE IN HELL

DCR was created in 2003 by the merger of the Metropolitan District Commission and the Department of Environmental Management. Some say it was a match made in hell. The two agencies had very different responsibilities and cultures. As supervisors pared back duplicative positions, they were left with a staff that had big gaps in its institutional memory.

The situation wasn’t helped by funding that yo-yoed up and down over the years and management ranks that were always in a state of turmoil. Over the past 13 years, the agency has been headed by at least 11 different commissioners, four of them on an interim basis.

Roy, the current commissioner, replaced Carol Sanchez, the head of an accounting firm who left the post after just seven months on the job. Roy served as undersecretary of environmental affairs in the administration of former governor William Weld and spent the last 15 years working in the private sector. He was six weeks into retirement when Matthew Beaton, the state secretary of energy and environmental affairs, asked him to take the helm at DCR.

Roy made headlines in August for using DCR staff and resources to host a private party on July 3 for Baker administration officials and Republican operatives. Roy and his top DCR aide, who cohosted the party, each served one-week suspensions without pay once their actions came to light.

When he was running for office, Baker pledged over the course of his first term to allocate 1 percent of the state budget to environmental programs, which would include the operations of DCR. Roy says the governor was sincere in his pledge, but circumstances haven’t allowed him to follow through.

The DCR budget hit a peak of $96.4 million in fiscal year 2008 before falling back to a low of $70.6 million in 2011, when former governor Deval Patrick was in office. The budget has recovered somewhat in recent years, but the current funding level of $86.8 million is only $200,000 more than what it was 12 years ago.

Roy says the budget numbers don’t include trust funds and federal aid that bring the total to about $100 million, of which approximately 22 percent must be raised by DCR itself through fees collected from concessions, leases, and parking.

The agency currently has 875 full-time-equivalent employees, its lowest level since the agency was created in 2003. A handful of the workers have political ties to the Baker administration, including Norman Orrall, a GOP state committeeman and the husband of state Rep. Keiko Orrall; Andrea Farretta, a Republican who ran unsuccessfully for a state rep seat; Republican state committee member Lisa Barstow; and William Cooksey, a former producer at conservative talk radio station WRKO. Matthew Sisk, a GOP state committeeman, resigned recently as Leo’s top aide after getting caught using the siren on his state vehicle to bypass traffic.

DCR lost 99 employees late last year when the Baker administration offered buyouts to state workers. Roy says he was allowed to replace a portion of them, but by the time he and his staff completed an analysis of which positions should be filled the administration had announced a hiring freeze. “So we haven’t been able to backfill as many as we would like,” he says.

Those who took buyouts included four regional planners, six program managers, three environmental analysts, and 10 civil engineers. “There was a lot of important institutional knowledge that walked out of the door,” says Whitney Hatch, the chairman of DCR’s Stewardship Council, a 13-member advisory group appointed by the governor.

“Things are much worse now than they’ve ever been,” says Hatch. “You’ve got people doing two and three jobs at a time and covering for each other. If there are any more reductions, they’re going to have to figure out what to stop doing immediately.”

In July, Erica Mattison, the legislative director of the Environmental League of Massachusetts, wrote a letter to House Speaker Robert DeLeo in which she said it was nearly impossible for the remaining staff at DCR to carry out the agency’s responsibilities.

DCR’s financial problems are reflected in unstaffed campgrounds, shorter seasons for pools and rinks, poorly maintained parks, and fewer children’s programs. The lack of funding is a major reason why Daley Field along the Charles River in Brighton sat fallow for years, and why DCR ultimately decided last year to lease the seven-acre piece of property to Simmons College.

Simmons paid DCR $500,000 to lease the waterfront property and agreed to invest millions of dollars in Daley Field installing tennis courts and turf fields. The fields are now open and being used by Simmons, the Brighton High School football team, and the Allston-Brighton Little League. Others can sign up to use the facilities when they are not in use by those groups.

DCR officials defend the deal as a way to bring a neglected piece of state property back to life. But George Bachrach, the president of the Environmental League, says Daley Field illustrates how DCR is squandering the state’s resources.

“The Commonwealth is shortchanged twice, first by DCR’s failure to adequately maintain parks and second by its failure to achieve just compensation for what the agency gives away,” he says.

90 PERCENT THERE

More than a year ago, DCR officials were talking excitedly about the development of a new electronic system to track the agency’s 1,000 leases and permits. The system, being developed by the consulting firm TR Advisors, was going to alert state employees when a lease was about to expire and provide all the information necessary to negotiate a new agreement. It was going to be a big step up from the haphazard paper filing system DCR used in the past.

“I’d say we’re about 90 percent there with that,” says Roy. “A lot of these arrangements for use of DCR property happened informally over a long number of years. It is taking quite a lot of time to get our arms around it and make sense of it. Again, things pop up all the time that maybe somebody in the organization knew about but not the right people. So it’s been quite a process.”

One example of something that popped up was DCR’s arrangement with Community Boating, the nonprofit that operates a sailing program from DCR-owned land along the Charles River near the Hatch Shell in Boston. A public records request for the agency’s lease with Community Boating yielded nothing. A DCR spokesman subsequently confirmed that the lease with Community Boating expired six years ago. The lease required Community Boating, which reported revenue of $1.62 million on its 2015 tax return, to pay no rent on the property.

“We’re going to look at that,” says Roy. “We are systematically moving people up to more realistic rents. We’re not trying to bankrupt anyone or put them out of business. But it’s not really fair to the system as a whole to have some free riders. We need everyone to contribute to the level of their abilities.”

All but one of the 30 yacht and boat clubs located on DCR land have been operating for years under one-year permits that require the clubs to pay rents ranging from $5,000 to $15,000 a year. The permits often stir outrage because many of the clubs are operated by institutions that could easily pay more, including Harvard University, MIT, and Boston University. Even some of the clubs don’t like the system because banks won’t lend them money for improvements when their tenancy is year-to-year.

In 2010, the Legislature passed a law drafted by Rep. Paul Donato of Medford authorizing DCR to negotiate long-term leases with the boat and yacht clubs. DCR followed through by creating a new leasing system that gradually steps up rental rates over 30 years to a peak of up to $102,000 a year. If implemented shortly after the Legislature gave the go-ahead, the leases would have brought in $1.9 million in additional revenue by now. But only one lease—with Northeastern University—was ever negotiated; the other clubs remained on one-year permits at their old rates.

DCR officials decided late in the summer to issue five-year permits to all of the yacht and boat clubs at the higher rates. Roy says the agency will negotiate 30-year leases with those clubs that want them.

Donato, who is frustrated at DCR’s slow response time, says the agency only issued the permits because it was under pressure to do something. Roy, however, says the five-year permits address the immediate problem and buy the agency time to finish the leasing process.

“We can’t do everything all at once,” he says. “It’s embarrassing it’s taken so long, but we’ve made pretty dramatic progress.”

DCR owns four piers in New Bedford, Fall River, Plymouth, and Gloucester that are used for cargo shipping and storage, ferry service, commercial fishing and processing, dockage for fishing vessels and cruise ships, tourism, and social events.

A report commissioned by the Baker administration found that three of the four piers are poorly managed and poorly maintained. All of them operate at a loss. The pier in Gloucester, which is managed by MassDevelopment under a contract with DCR, was singled out as the best run.

The August report, prepared by Karl F. Seidman Consulting Services and UrbanFocus LLC, reveals a “hodgepodge of leasing arrangements and a lack of good real estate leasing practices” by DCR. At the New Bedford pier, the report documents leases with seven different categories of tenants. In four of the categories, the tenants were operating under expired leases. “Several agreements provide for automatic one-year renewals without any rent increases and have been renewed in this manner for five years or longer,” the report says. The report also notes that “large portions of the pier are in terrible condition and in critical need of major repairs.”

The report calls for the piers to be transferred to another state agency or authority with more expertise in economic development and the resources to fully support the state piers.

New Bedford Mayor Jon Mitchell says DCR has got to go. “DCR’s management [of the New Bedford pier] has been woefully inadequate,” he says. “It’s a facility that has been ignored for an awfully long time and it ought not to be managed by an agency whose primary business is parks and beaches.”

Roy says he is well aware of the DCR deficiencies cited in the report, but no decision will be made on what to do with the management of the piers until the release of a second report examining their economic potential. In the meantime, DCR has hired a new pier manager in New Bedford and is investing in refrigeration equipment there that will allow imports of produce year-round.

“So long as the DCR is responsible for those piers, we’re going to do our best to manage them well,” he says.

RENT RENEGOTIATIONS MOVING SLOWLY

Soon after he was appointed DCR commissioner, Roy says he sat down with Robert Zimmerman Jr., the executive director of the Charles River Watershed Association. The association was paying DCR $100 a month to rent an entire building at the Leo J. Martin golf course in Weston. The association was also responsible for capital improvements, and Zimmerman says he has spent about $250,000 over the last 11 years on a new roof, septic system, and other repairs.

Roy says he told Zimmerman he wanted to make the association the agency’s poster child for its efforts to raise rents to market rates. “If your rent goes up dramatically, then it’s going to help me with everyone else whose rent I need to raise dramatically,” says Roy, recounting the conversation. “So now they’re up to $2,000 a month, which is still pretty cheap but a big increase over what they were paying. That’s money that Bob now has to go out and raise, but he’s up for it because he realizes DCR needs money for its mission, too.”

Zimmerman says Roy’s portrayal of their conversation is accurate. He says Roy negotiated fairly and honestly and both sides come out ahead. DCR collects more rent money and the association is no longer on the hook if the roof leaks or something else goes wrong with the building.

Roy cautions that future rent renegotiations may not go as smoothly. Some leases, in fact, are off-limits. For example, DCR’s lease with the Museum of Science won’t be changing any time soon. The museum pays $1 a year for its lease of a large swath of land along the Charles River. The initial lease has several decades left to run and the museum has an option for another 99 years at the same price. “That’s not the type of agreement I would care to enter into today,” Roy says.

The rental renegotiations at DCR are likely to take a long time. Roy says the agency issues more than 1,000 annual and multi-year permits and there are only two employees working on them, aided by three to four others on a part-time basis.

“We haven’t made our lives easy by the way this was set up. It happened in a very ad hoc fashion,” he says. “What we’re trying to do is get our arms around it and know what we’ve got, get it so the invoices are sent out on a regular basis, and then, when the payments come in, make sure they’re attributed to the right accounts.”

Roy hasn’t set any targets for boosting the agency’s own-source revenue from concessions, parking, and leases, in part because staffing is limited. “Our staffing levels are lower than they’ve been in the past,” he says. “It takes staff effort to do revenue collection, so at our current staffing levels I don’t know how much more revenue we can actually collect.”

Hatch, the chairman of DCR’s Stewardship Council, advocates for the establishment of a fiscal advisory group to conduct a “basic budget analysis” of the agency. He says the analysis could be used as a basis for developing a range of performance standards for DCR—what Hatch calls “gold, silver, or bronze” service levels—and an estimate of how much money the agency needs to perform at those levels.

The council was able to persuade the Legislature to allocate $200,000 for the task. Although the money was vetoed by Baker, the veto was overridden by the Legislature. It’s unclear whether Baker will cut the funding anyway to help bring this year’s budget into balance.

Hatch says it is urgent that something be done to turn things around at DCR. “Right now, I think the agency is pretty close to going broke,” he says.